DEAR BOB: I just had a very bad experience with my homemortgage company. For the last few years, I have been paying my mortgage on theInternet each month. I always included an extra $100 to $500 principal payment.However, my mortgage was recently sold to a new loan servicer. I was shocked todiscover all my extra mortgage principal payments have been credited to my escrowaccount, which is supposed to pay my property taxes and homeowner’s insurancewhen they come due. The result is I have several thousand extra dollars in thataccount. But none of my extra principal payments have reduced my mortgagebalance. As I was expecting to save thousands of dollars of interest, what canI do now since my old loan servicer is gone? –Brian Y.
DEAR BRIAN: Internet online mortgage payments are especiallydangerous for borrowers because you never know for sure if extra principalpayments are being properly credited to reduce your mortgage balance and saveinterest dollars.
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At this point, it will be a nightmare trying to get yourformer loan servicer to straighten out the mess. If I were in your situation, Iwould phone your new loan servicer, explain the problem, and ask that thesurplus in your escrow account be credited to reduce your mortgage principalbalance.
The result will be to save interest from now on, althoughyou lost out on past interest savings that should have been accruing to youeach month.
If you continue making online mortgage payments be sure tocheck each monthly payment to be certain it is properly credited to yourprincipal and interest, escrow account, and for principal reduction if you makeextra principal payments each month.
PRINCIPAL-RESIDENCE TAX BREAK APPLIES TO JUST ONE LOT SALE
DEAR BOB: My wife and I own our home, which is locatedadjacent to two vacant lots, one on each side of our house. We recently soldone of the lots at a large profit. A friend told me he read in your column thatour profit on the lot sale adjoining a principal residence is tax-free. Is thistrue? Can we also sell the other lot tax-free? –Marilee S.
DEAR MARILEE: Internal Revenue Code 121 says your capitalgain from the sale of a lot adjoining your principal residence can be tax-freeif you also sell your principal residence within 24 months before or after thelot sale. Of course, that presumes you owned and occupied your principalresidence at least 24 of the last 60 months before its sale.
However, this exception for the sale of an adjoining lotonly applies to one lot sale. When you sell the lot on the other side of yourprincipal residence, it will be fully taxable as a capital gain.
Of course, if you don’t sell your principal residence within24 months of the lot sale, then the lot sale profit is taxable. Full detailsare available from your tax adviser.
LOSS ON SALE OF YOUR HOME IS NOT TAX DEDUCTIBLE
DEAR BOB: We bought our home at the top of the market inearly 2005. Now we have to sell due to a divorce and other reasons. Afterpaying the selling costs, if we are lucky we will have a loss of about”only” $50,000. Can we deduct this on our tax returns? –Royce C.
DEAR ROYCE: No. A loss on the sale of your personalresidence is not tax deductible. Your tax adviser can provide further details.
The new Robert Bruss special report, “When It’s Smartto Prepay or Refinance Your Mortgage,” is now available for $5 from RobertBruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736or instant Internet delivery at www.BobBruss.com.Questions for this column are welcome at either address.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
Copyright 2007 Inman News